"Fracking, farmers, and rural electrification in India"
abstract
Is large-scale electrification necessary for the structural transformation of rural economies? We combine two natural experiments in India within a regression discontinuity design to shed light on this question. Most of the world's guar, a crop that yields a potent thickening agent used during hydraulic fracturing ("fracking"), is grown in northwestern India. In response to the United States' fracking boom, Indian guar prices increased by nearly 1,000 percent. Leveraging population-based discontinuities in the contemporaneous roll-out of India's massive rural electrification scheme, we show that access to electricity significantly increased non-agricultural employment in villages located in India's booming guar belt. In contrast, electrification had no discernible impact on labor-market outcomes in villages in the rest of the country. The growth of non-farm work is partly driven by the rise of electricity-intensive firms that complement agricultural production. Electrification alone is typically not sufficient to deliver economic benefits but it may be necessary to enable households and firms to respond to rapidly changing economic contexts in welfare-enhancing ways.